The Guardian: an editorial, and letters in response

… Theory is easier than practice. Set the basic income too low, and far from empowering workers, it could act as a wage subsidy, allowing employers to hold salaries down, as many argue happened with tax credits. Too high, and while it might transform power relationships in the workplace, giving people the freedom to turn down low-paid work, it might prove a disincentive to working altogether. And that’s before we consider how it might be paid for. Even the RSA’s moderate proposal for a basic income of £3,700 a year would cost upwards of £12bn extra a year if it included a guarantee that families with young children would not lose out. Would this be money better spent on the NHS, schools or childcare? Would basic income be part of a lasting welfare settlement? There’s a risk that it could be eroded over time – just look at what happened with tax credits. … It is an interesting idea whose time has not yet come.

… Your editorial makes some valid points. Yes, there are basic income schemes that would be expensive; and if a basic income were too high then it might disincentivise employment. However, there are also schemes that would not be expensive, and there are schemes that would be more likely to incentivise employment than to disincentivise it.

Research for the Institute for Social and Economic Research at the University of Essex (see An evaluation of a strictly revenue neutral Citizen’s Income scheme, ISER, June 2016) shows that a basic income of £60 a week could be paid for by reducing the income tax personal allowance, increasing the rate of income tax by just 3%, and revising national insurance contribution regulations, and would not need additional public expenditure. The scheme would take a lot of households off means-tested benefits, and every one of those households would experience lower deduction rates on additional earned income, so employment would be incentivised. The scheme would reduce poverty, reduce inequality, and, importantly, would not impose losses on low-income households at the point of implementation, which some other proposed schemes would do.

It is the current benefits system that disincentivises employment, because a lot of households experience almost no additional disposable income if they earn more; and it is the current system of in-work benefits that function as a significant subsidy to wages, because tax credits and universal credit go up if wages go down. A basic income would not do that, so it would have less of a subsidy effect.

It is of course important to hear differing views on whether basic income is an idea whose time has come: but those views – and especially those offered by the Guardian – should be based on the available evidence.